Google, FTC reach agreement in anti-competition probe

SETTING THE RECORD STRAIGHT (publ. 1/8/2013, page A2) A story about a U.S. antitrust investigation of Google incorrectly reported Microsoft's role with the Association for Competitive Technology. While Microsoft is a longtime financial sponsor of the trade group, which has often allied itself with Microsoft's policy views, it is not a co-founder. That incorrect characterization also appeared in a Dec. 11 article and a July 29 column.

Google (GOOG) won a major victory Thursday when the Federal Trade Commission said the Internet giant did not manipulate search results to promote its own products unfairly, after an 18-month investigation that struck at the heart of Google's business and ultimately endorsed one of its key strategies for maintaining its industry dominance.

In a decision that disappointed Google's competitors, the FTC said it was ending a far-reaching antitrust investigation without taking action on the search issue, after essentially upholding Google's argument that recent changes in its search operation were intended to benefit consumers even if they had the effect of downplaying rival online services.

Advertisement

The outcome means consumers will continue to see Google products, such as travel information or paid shopping listings, displayed in some of the most prominent positions on Google's search pages. Google, which garnered almost 75 percent of all U.S. search advertising revenue last year, says those products help it provide the most useful and relevant information to consumers.

The commission announced concessions from Google on some other competition issues, including a legal order requiring Google to let other companies use patented mobile technology that's considered essential for such popular gadgets as Xboxes and iPads.

Mountain View-based Google also voluntarily agreed to change some practices involving the use of excerpted material from other websites -- such as reviews from Yelp -- as well as restrictions that made it difficult for some businesses to move their advertising to rival Internet platforms. Google had already stopped using excerpted material in that fashion, however, and the concessions are not expected to have a big impact on Google's business or the way its search results appear to most consumers.

Regulators in several states and Europe are also reviewing antitrust complaints against Google. But the company's chief legal officer, David Drummond, welcomed Thursday's announcement in a blog post that trumpeted, "The conclusion is clear: Google's services are good for users and good for competition."

Reaction from the tech industry was mixed. One prominent trade group, the Computer and Communications Industry Association, praised the FTC for not interfering with Google's search operation. But groups supported by Microsoft, maker of the rival Bing search engine, and other Google competitors condemned the commission for failing to take stronger action.

"It appears the FTC largely chose to abdicate its role as the protector of consumers and competition," said a statement from the Association for Competitive Technology, co-founded by Microsoft.

FTC Chairman Jon Leibowitz said in a statement that officials were disturbed by some of Google's practices, particularly the abuse of patents acquired when Google bought Motorola Mobility last year. Motorola and Google initially agreed to let rivals use the technology, which is essential for different devices to interact, according to Leibowitz, who said both companies later reneged.

Google did not admit wrongdoing, but under the consent order announced Thursday, it agreed to negotiate reasonable licenses with companies that want to use the technology in their products. The order restricts Google's ability to block other companies from selling those products.

On the search issue, the FTC examined complaints from rival online companies that accused Google of highlighting its own services while displaying rival services less prominently in two ways.

First, the complaints focused on Google's introduction of new features, such as boxes that show paid advertising and Google's own service listings at the top or side of a page of search results, while pushing the basic search results lower on the page. Second, competitors complained that Google changed its search algorithms to push rival sites -- such as independent shopping services like NexTag -- lower in the list of standard results.

Google argued that its changes are part of a constant effort to provide the most useful information, and that consumers are free to use other search engines, such as Bing or specialized search sites.

In a formal statement, the FTC said its review upheld Google's arguments, although it found cases where the changes de-emphasized other companies' listings and caused them to suffer a "significant" loss in Web visits.

"While some of Google's rivals may have lost sales due to an improvement in Google's product," the FTC added, the results are a "common byproduct" of "the competitive process that the law encourages."

FTC attorney Beth Wilkinson added that "undoubtedly, Google took aggressive actions to gain advantage over rival search providers. However, the FTC's mission is to protect competition and not individual competitors." She said the evidence did not warrant legal action.

An attorney for several Google rivals complained that the FTC did not pursue evidence aggressively enough. Menlo Park lawyer Gary Reback said the commission didn't contact some of his clients who filed complaints and only sought limited information from others.

Leibowitz said FTC staffers received 9 million pages of documents and interviewed "numerous industry participants." But the outcome was a far cry from the more sweeping enforcement action that some believe the agency had telegraphed last year, when it hired outside experts to prepare for what some expected to be a courtroom battle on a par with the government's landmark lawsuit against Microsoft in the 1990s.

The FTC made a mistake in launching such an extensive investigation without stronger evidence of wrongdoing early on, said Santa Clara University law professor Eric Goldman. But he gave the agency credit for not taking action simply to justify its efforts.

In this case, he said, "they made it clear that the best way to protect America's consumers was for the FTC to do effectively nothing."

Contact Brandon Bailey at 408-920-5022; follow him at Twitter.com/BrandonBailey.

what the ftc announced

Here's what the FTC announced Thursday:-- Google's efforts to highlight its own search-related products may hurt some rival online services, but the FTC said this doesn't amount to unfair competition because the changes serve consumers.-- Google used mobile technology patents to compete unfairly, the FTC alleged, but the company -- without admitting wrongdoing -- has now agreed to let competitors negotiate licenses to use the technology on reasonable terms.-- Google has also agreed not to "scrape" content from other websites, such as Yelp, if it is asked to stop, and to drop restrictions that made it harder for some businesses to advertise on competing Internet platforms.-- The FTC's action is not binding on regulators in several states and Europe, who are also reviewing antitrust complaints against Google.